Leon's looks to buy The Brick

One of Canada's best-known furniture retailers is trying to buy up a high-profile rival amid a growing trend by American retailers to expand into the Canadian market.

Leon's Furniture Limited (TSX: LNF) is offering to buy The Brick Ltd. (TSX: BRK) in a deal the company values at $700 million.

The offer is subject to approval by Brick shareholders and will need court and regulatory approval.

Leon's says it will pay $5.40 per share in either cash or debentures _ the closing price on Brick shares on the TSX on Friday was $3.50.

It hopes to close the deal in the first quarter of 2013.

Leon's says in a news release that if shareholders accept the offer, the two chains will continue to operate as separate entities.

The two chains are facing new competitors, chiefly in the form of American retail giant Target, which plans to open up to 135 stores across Canada in the coming year. Walmart is also adding 73 stores across Canada in the coming months, including 28 former Zellers stores.

The acquisition of The Brick would will strengthen Leon's position in the home furnishing marketplace, said Leon's CEO Terry Leon in a release.

"During these economic times where we have seen multiple American corporations make inroads in our country through acquisitions, it is a pleasure to see two successful Canadian retailers reach such an agreement that will better serve Canadian consumers."

"Our combined team will have access to national buying opportunities in merchandising and marketing, and a national distribution network that will enable us to greatly enhance our online shopping capabilities."

Other major Canadian retailers such as HBC, Shopper's Drug Mart and Jean Coutu are also making preparations either through restructuring or how they do business to prepare for the competitive threat of Target.

Leon's, headquartered in Toronto has 76 stores with locations in every province except British Columbia.

The Brick, which is based in Edmonton, has 230 stores operating under The Brick, United Furniture Warehouse, The Brick Mattress Store and Urban Brick banners.